FCA puts equity release under scrutiny over reputation ‘concerns’

Equity release has become a 'dirty word' (or is that two words?), according to the Financial Conduct Authority. Carmen Reichman reports

The Financial Conduct Authority (FCA) could step up its regulation of the equity release market after a high-ranking official said the market’s bad reputation had hampered its development.

The regulator has invited industry and consumer views on equity release as part of a new study of the mortgage market, following its implementation of the Mortgage Market Review (MMR).

It wants to see how regulation can help foster “more of a market” in areas like equity release, which it said in recent years had become “a dirty word”.

The regulator said it was keen to address the problem of affordability in retirement and has identified unlocking the value of a home as a potential remedy.

This was particularly true for an older population that is increasingly asset-rich but cash poor, the FCA said.

Speaking at a conference in London on 7 September, director of strategy and competition Christopher Woolard was due to say: “The average pension pot is £30,000, yet a significant number own property assets of around seven times that number or more.

“The ability to access some of that asset, as a restricted lump sum or as a gradual income, could make a significant difference to people’s lives.

“Yet, in the not too distant past, equity release became a dirty word. While we have seen a combination of regulation and industry-led initiatives to help clean up the market, some will argue that the costs of equity release, both up front and compounded over time, are relatively high for the individual, and that the previous image has stuck.”

Woolard suggested the market’s bad reputation could have been behind a reduction in the number of firms currently operating in the UK and the wider European Union (EU).

Only 13 member states currently have a market, he said, accounting for just 0.1% of total EU mortgage lending.

He said the FCA wants to address any barriers to competition that firms may face, and how this could be changed.

“We believe there is a debate to be had about what products and markets could exist, and whether more entrants and innovation here might benefit consumers with greater choice and improved products,” he said.

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